Farm Horizons, April 2013

Cooperatives abound in MN

By Jennifer Kotila

There are more than 1,000 cooperatives in Minnesota, leading the rest of the nation, according to Bill Oemichen of the Cooperative Network.

Any number of businesses can be cooperatives, including health care, groceries, senior housing, credit and financial services, and insurance. However, agriculture makes up a strong portion of cooperatives.

Cooperatives stem from a self-help philosophy, and the belief that the local community can work together to help the local community, Oemichen said. They are unique businesses organized by people to provide goods and services needed by the community.

“Whoever buys products or services is eligible to be a member,” Oemichen said. Because the democratic organizations are owned and governed by their members, the consumers, they tend to be much more responsive to their consumers than other business models, he added. All members of a cooperative are eligible for a seat on the governing board.

The capital of a cooperative is equitably contributed by its members who democratically control it, and may receive compensation on the capital subscribed. Surpluses may be used to develop the cooperative, set up reserves, benefit members in proportion to their transactions with the cooperative, and support other activities approved by the membership.

“In part, that’s what makes co-ops so different. When they have a good year, they return the profit back to the owners  the members  and it’s going right back into the local economy,” Oemichen said.

He noted that he really became a strong advocate for cooperatives when he was the administrator for the Wisconsin Division of Trade and Consumer Protection for six years. “Out of more than 200,000 consumer complaints handled each year, fewer than 10 percent of the complaints were against cooperatives,” Oemichen said.

If a consumer is unhappy with the service or product provided by a cooperative, they can often get through to talk to the CEO or general manager, he added.

However, that is not typically the case with corporations, where even he, as the head of a government agency, had difficulty contacting CEOs or general managers, Oemichen noted.

The first recorded cooperative in the US was created by Benjamin Franklin, Oemichen said. The Philadelphia Contributorship is a mutual insurance company still in operation today. “We consider him the father of the American cooperative system,” Oemichen said.

Minnesota’s abundance of cooperatives can be attributed to its Scandinavian and German heritage, he added. Cooperatives are a large part of the business industry in Scandinavian countries and Germany. However, the business structure of cooperatives stems from the United Kingdom, Oemichen said.

“There is a very vibrant cooperative business community in Minnesota,” Oemichen said, noting that Cooperative Day at the capital took place March 20. Most of Minnesota’s cooperative history ties back to rural education, electricity, and telecommunication (remember the old party lines?).

Most recently, Minnesota has seen a lot of growth in grocery cooperatives and senior housing cooperatives. “We’re seeing a lot of co-op growth in other areas, as well, as Minnesotans have thought it was a better idea to work together,” Oemichen said.

Many people may be patrons of cooperatives without knowing it, since many do not use the term “co-op” or “cooperative” in their name, according to Oemichen. For instance, KFC, Ace Hardware, the Associated Press, and American Family Insurance are all cooperatives, and there are many more examples around the country.

“We are seeing quite a bit of cooperative regeneration around the globe,” Oemichen said, noting 2012 was named the International Year of the Cooperatives by the United Nations, and this decade has been declared the Decade of the Cooperative by the International Cooperative Alliance.

In the economic downturn of 2008, cooperatives fared better than corporate America, Oemichen noted. Given the fact that a cooperative’s consumers are the board, it tends to be much more conservative when investing. Most cooperatives did not get involved in the speculative investing that took place, he added.

Oemichen noted CHS (most people know them as Cenex) will be providing about $600 million in returns to its members, and Land O’ Lakes will be returning $113 million. “Agriculture is one of the few bright lights in the midwest economy, in large part due to cooperatives.”